UPDATE: Brazil's Vivo Sees Market Share Up, Margins Off In 1Q
May 03 2010 - 3:14PM
Dow Jones News
Brazil's leading cellular operator, Vivo Participacoes SA (VIV,
VIVO4.BR) saw its market share increase but its margins slip in the
first quarter as it lowered prices and conducted aggressive
promotions.
The joint venture between Spain's Telefonica SA (TEF, TEF.MC)
and Portugal Telecom SGPS SA (PT, PTC.LB) earlier Monday reported a
first-quarter net profit of 191.9 million Brazilian reals ($110
million), up from BRL133 million in the first quarter of 2009.
Earnings came in below market expectations. A survey of six
analysts, compiled by the local Estado newswire, came up with an
average forecast of BRL243.7 million.
Vivo accounted for 43% of all net cellphone acquisitions in the
first quarter. Moreover, it increased its share of the postpaid
market to 19.5% by the end of March, after obtaining 71.5% of the
net additions.
"We believe the main driver was the superior quality of services
(customer service and network) combined with its data offerings,"
said Vera Rossi, telecom analyst at Morgan Stanley in a report.
However, the aggressive price policy means that average revenue
per user fell 9.2% compared with the year before.
"This new level reflects increased penetration in lower income
groups and intense commercial disputes in strategic markets, such
as Sao Paulo," said Sao Paulo-based Link Investimentos in a
report.
Vivo's first-quarter net revenue rose 4.8% to BRL4.23 billion
from BRL4.04 billion in the year-earlier period, helped by a 52%
jump in data and value-added service revenue.
The company's earnings before interest, taxes, depreciation and
amortization, or Ebitda, was BRL1.27 billion, up from BRL1.22
billion in the first quarter of 2009.
The Ebitda margin, a measure of profitability over net revenue,
was 30.1% in the quarter, down slightly from 30.4% in the
year-earlier period.
According to Vivo Chief Executive Roberto Lima, the company
believes it can maintain margins at this level in the future.
Good cost controls allowed Vivo to maintain the margin above
30%, despite the intense commercial push, said Morgan Stanley's
Rossi.
Overall, investors classified the results as neutral. Vivo
shares were 0.3% lower at BRL46.08 in afternoon trade on the
Brazilian Stock Exchange, or Bovespa, while the benchmark Ibovespa
index was 0.5% lower.
-By Alastair Stewart, Dow Jones Newswires; 5511-3544-7072;
alastair.stewart@dowjones.com
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